Dissecting a $231 Million High-Tech Boondoggle

The L.A. Times takes to task the U.S. Congress, the Obama administration, and various military agencies for their combined role in supporting the expenditure of vast amount of money on a system called the Precision Tracking Space System. All told, according to the paper, the PTSS program -- which was to have provided early warning of missile launches, and precision tracking of the missiles themselves -- ended up blowing through more than $230 million before being cancelled. After talking to defense experts and reviewing hundreds of documents, the Times comes to what probably sounds like an easy conclusion for any big-budget military program that never reaches operation: it shouldn't have even left the drawing board.

Comments

good.

[Gravis Zero]

it's good that they cancelled the project. the only thing left is for everyone involved to pay back the money they took... with interest. to be fair, they can have the rest of their lives to pay it back.

Re:good.

[__aaclcg7560]

I'm waiting for Wall Street to repay the country for causing the Great Recession. I was out of work for two years (2009-10), underemployed (working 20 hours per month) for six months, and filed for chapter seven bankruptcy in 2011. I'm still trying to recover from that five years later.

Re:good.

[ganjadude]

blame sub prime housing loans, enacted under president Clinton for the majority of what happened there. I was in the exact same boat

Re:good.

[__aaclcg7560]

I blame Bill Clinton for repealing the Glass-Seagall Act, which turned boring old banks into high octane casinos. But Wall Street is ultimately responsible for pushing the repeal and gaming the system.

Re:good.

[__aaclcg7560]

politicians write the rules, dont blame others for playing by the rules signed off on by politicians.

These days the politicians don't write the rules. The Wall Street lobbyists do. I'm not giving neither Wall Street nor the politicians a free pass.

http://www.motherjones.com/politics/2014/12/spending-bill-992-derivatives-citigroup-lobbyists

Re:good.

[jamstar7]

I blame Bill Clinton for repealing the Glass-Seagall Act, which turned boring old banks into high octane casinos. But Wall Street is ultimately responsible for pushing the repeal and gaming the system.

Yeah, that wasn't one of Slick Willy's brightest moves. Prob is, he signed off on it to get other shit done and didn't think about the repercussions.

Re:good.

[__aaclcg7560]

Prob is, he signed off on it to get other shit done and didn't think about the repercussions.

Not quite. Citigroup was in technical violation of the Glass-Seagall Act when it bought Travelers Insurance. Not surprisingly, the Citigroup CEO was a campaign contributor to Bill Clinton. As well all know too well, money speaks loudly to the Clintons.

http://money.cnn.com/2015/11/12/investing/citigroup-john-reed-glass-steagall/

Re:good.

[dbIII]

You needed political connections or somewhere to hide your money outside of the country - Trump went broke four times and just laughed it off.

Re:good.

[dbIII]

Yet they keep on coming up in politics through history over and over. It's if you guys are going back to the Fuedal system and they are nobility going back a couple of centuries. That's not a very good thing ti see in a democracy, people who see themselves as born to rule.

Re:good.

[sjames]

No. Clinton ordered the banks to be more willing to write mortgages on STARTER HOMES for first time buyers who couldn't afford large down payments and had less than stellar credit (but not terroble).

Instead, the banks knowingly made bad loans on McMansions and then processed them into dubious CDOs which they sold (hot potatoed) based on outright fraud by the ratings agencies as AAA investments. Absolutely nobody told them to do that except their CEOs eyeing huge bonuses. Then all the robosigning, certainly that wasn't mandated.

The fact is, a bunch of exceptionally greedy and fat pigs ripped the world off and then passed the blame. The big failing politically was not making bacon of them for the rest of us.

Re:good.

[complete loony]

The recession was inevitable, and we still haven't dealt with all of the fallout. Sub prime housing loans were the straw that broke the camels back, but even that is only a symptom of a much larger underlying problem.

Economists don't understand the economy. They are experts at trying to explain why banks, debt and money don't matter. When in the real world, they matter a great deal.

Until economists study and understand the actual role of bank debt, and act to constrain lending to constructive activities, we will continue to make the same mistakes.

Re:good.

[ganjadude]

it doesnt matter which person is actually putting pen to payer, only a politician can sign those words into law.

Re:good.

[__aaclcg7560]

wondering why housing loans are cheaper than school loans, which anyone can tell you a home has value, an associates in womens studies has none

Student loans cannot be discharged in bankruptcy court. Another perk that the Wall Street lobbyists wrote for themselves. Private student loans have higher interest rates than federal student loans because the banks want to milk their borrowers for every dime that they can legally get. Student loans should be cheaper than housing loans since an education is an investment in the future.

Prior to the Great Recession, Wall Street analysts considered it impossible for homes to lose value as most price drops were limited to regional markets. That assumption got turned upside when the entire housing market in the United State went kaput. A neighborhood of empty houses are quite worthless to the banks.

Re:good.

[sjames]

And Bush for idly watching the whole thing happen through two terms in office? And the bankers for ignoring the many warnings from their quants?

Re:good.

[peragrin]

Not everyone has enough for a nest egg of safety.

When 75% of your income goes to rent the cheapest place you can find you aren't going to have a lot left overto live on.

Re:good.

[__aaclcg7560]

No, it's because the federal government has the business sense of a lump of clay.

If the government had any business sense whatsoever, it would banish the predatory banks from the student loan market and make past student loans eligible for refinancing at lower interest rates. Student loans are the next ticking time bomb in the economy. Only the government can step in to relieve the pressure before it blows a hole in the economy.

Investments are intended to have a positive return.

I wish Wall Street would apply that standard during the run up to the Great Recession. So many subprime loans and Collateralize Debt Obligations (C.D.O.s) wouldn't have been issued, as requiring positive returns is the opposite strategy of maximizing fees and damning the consequences.

Allowing someone to borrow money so they can party for a few years isn't an investment in the future.

The country doesn't need anymore lawyers. We need more plumbers, electricians and carpenters.

Re:good.

[meglon]

I continue to see people blame Clinton for the Gramm–Leach–Bliley Act, you know.... Phil Gramm (REPUBLICAN), Jim Leach (REPUBLICAN), and Thomas J. Bliley, Jr. (REPUBLICAN)... and i have to wonder if anyone that does was even alive in the 1990's. I mean, you'd have to have been comatose to think that Clinton could have gotten much of anything passed the republican congress he had, and even worse off to think that 3 of the most powerful REPUBLICANS at the time would be THE ONLY THREE people whose name got put on the bill. I mean... serious brain-death, head up ass comatose to think that. Yet, people who wanted something that turned out to be a serious fuck-up will continue to try to place blame elsewhere.

The REPUBLICAN bill to repeal the Glass-Steagall, which they'd been attempting to do for 20+ years prior to Gramm-Leach-Bliley, passed without enough votes to sustain a veto, however democrats agree to go along with it after republicans yielded on privacy legislation to keep medical and financial records private (republicans didn't want them to be), and on consumer protection legislation (again, republicans at the time didn't give a flying fuck about consumers rights). After conference, Clinton was sent a version of the Gramm–Leach–Bliley Act that was veto-proof. Now, you could argue that he could have veto'd it, but it would have been purely symbolic.

So.... Glass-Steagall was actually repealed by republicans (because that's where bills get repealed... the house and senate, not the presidents desk), after they held consumer protections and private citizens privacy rights hostage to do what they'd been trying to do for decades. You can certainly blame Bill Clinton... but you'd be wrong, and anyone who lived through the 1990's (and actually remembers them) should know that.

You are correct though about that being a massive negative on economic stability.

Re: good.

[tgrigsby]

Don't be a jackass. Big money speaks to nearly all politicians. In fact, it's the rare bird indeed that doesn't sing for its dinner.

$231 Million?

[sqlrob]

For government projects, isn't $231M "never leaving the drawing board"?

Re:$231 Million?

[ColdWetDog]

Actually, this seems like a win for the system. They ONLY spent a quarter billion dollars before the checks and balances brought the system to a halt. Had they not been able to stop it, the program would have chewed up something between 30 and 40 billion dollars throughout the life of the project. And still done very little. The really scary part is the sidebar to The Fine Article where the LA Times talks about all of the OTHER screwed up projects of the Defense Missile Agency that have already chewed up tens of billions of dollars.

Seems like the Pentagon and Congress hasn't figured out that Star Wars is a fantasy.

Re:$231 Million?

[ThosLives]

Hell, the general US public just spent that much money in four days to go watch a movie.

While there may be some argument that perhaps that money could have been spent elsewhere, complaining over this one small amount of cash is a bit silly. Now, if we talk about a systemic problem - for instance, what percentage of projects like this get cancelled? - that is going to be much more productive.

$230M is something like, what, the salary of 1500 well-paid engineers and managers? Split across 5 years, that's only 300 people, which is a mid-size engineering company. Even if you figure that 10% of that went to line someone's pockets, the rest to actual employees of companies, I'd tend to agree with this - $230M is chump change, and probably actually kept some people employed. And it's not even like it was a lot of people (you might be able to change the number by a factor of 2 or 3 if you are paying median or low-end salaries). So it's not like there is much direct money spent on "political influence" here.

Re:$231 Million?

[__aaclcg7560]

A single F-35 costs more than that program does, although I suppose an F-35 can at least fly.

The F-35 program is an insidious example. With contractor offices located in 44 states, it's very hard for Congress to cancel the program and explain to the folks back home why they voted for local layoffs.

Re:$231 million?

[PPGMD]

And used. New wrenches can be much for expensive, particularly if they are made in America.

Also let me illustrate government contracting, yes all the RFQs are posted online. But it isn't like you can bid on it, they typically require so much paperwork that companies that don't normally deal with government contracts either balk at it, or screw something up and their bid is not considered.

More often than not government contracting goes through a handful of distributors who not only know all the paperwork, but are often owned by people that can check off the right boxes on the minority statements.

So even though the government gets a quantity discount, often with all the overhead and additional testing the government requires (like getting a certification from an independent lab or doing NDI on every item delivered) even with a quantity discount it might still be more expensive then buying it at retail.

A good example of this is GE engines, they make the F108 that is used on the KC-135, other than a different name plate it is almost identical to the CFM56s they deliver to civilian customers. The F108s typically cost almost 10% more than the CFM56, and doesn't include the warranty that they give to civilian customers. That is because the USAF slows the line down for inspections and testing, and paperwork lots and lots of paperwork. Thus it costs the USAF 10% more than if they just bought them COTS.

Another good example of the paperwork is that the Lockheed is required to keep all the paperwork from the F-16 program, there is so much paperwork from that program that it has it's own warehouse. Some of that paperwork is almost 50 years old, and Lockheed will probably have to keep it safely stored until the very last F-16 is retired.

Government in it's attempt to control fraud, and waste has ironically caused wasteful increases in costs to prevent the waste and fraud.

Taking risks guarantees failure

[StevenMaurer]

In addition to all the other comments about $231 million being chump-change, recognize something else about advanced technological research: sometimes it doesn't pan out.

That doesn't mean that we should never try to research new things though. Not everything can be discovered the way the Japanese like to do it, through hundreds of small polishes to an existing working design. Sometimes you need to think big to make a real breakthrough.

I would also put this story and some of the kneejerk responses to it in the category of "why the US isn't as successful as it once was". If the 60s were like today, with anti-science teabaggers controlling half of congress, would we have made a manned mission to the moon? Especially given that every one of those missions could easily have ended in disaster?

No people. Even the vaunted Solyndra failure came out of a program that overall had a better success rate than most private funding, and in the end, not only advanced technology, it made a considerable profit for the taxpayer. The willingness to scream and cry and throw tantrums by the anti-technology/pro-fundamentalist haters, every time some risk doesn't come out out 100% perfectly, is a cancer on the body politic. And we're sinking due to the over caution that results.

Re:Government fails at everything

[ShanghaiBill]

large uncontrolled budget, with unlimited spending increases, and zero common fiscal sense.

In terms of military budgets, $230M is nothing. We have other boondoggles that have burned through a thousand times that. In fact, this program is such a trivial amount, I suspect it is being emphasized to distract people from the real waste. The F35 program burns through $230M every three days.

A typical republican budget plan.

This program was proposed by the Obama administration, and passed by congress with plenty of votes from both parties.

Re:Government fails at everything

[dbIII]

so you are saying the republicans killed this boondoggle, yet you are going to make the claim that they only did it because...obama?

Yes they were voting against absolutely everything back then because...obama - please try to keep up.

Spite is a very childish way to run an opposition and shows utter contempt for the country but it can be effective at times.

created by Dem Congress, fought by Republicans

[raymorris]

Actually the program was created in 2008/2009, while the Democrats controlled everything- the House, Senate, and White House. Additional funding was added later by the Democrat-controlled Senate while Republicans argued against it.
http://graphics.latimes.com/mi...

Re:Vast Amount of Money?

[meglon]

http://www.businessinsider.com...

It can't fight, it can't run, and it's afraid to get wet. The F-35 is a piece of shit that's going to cost us over 1.5 trillion dollars.

Re:both, actually. One event causes the next

[sjames]

That's about half a bubble off. Nobody expected the banks to just give away money. They were expected to accept slightly more risky loans on starter homes. Slightly more risky, but not so much that they would lose money.

In many cases, the banks set the loans up to fail rather than simply risking failure. That is very much on them. They also made the loans on McMansions. I don't mean starter homes that now cost more due to demand, I mean ginormous houses on teeny little lots. That too is on them. It was relentless. My father in law moved during that time and when he went to get a mortgage on the new home, they poured on the pressure to take a larger loan and get a bigger house. Fortunately, he was a sensible man and insisted on a more affordable mortgage, but he had to insist. That had nothing at all to do with Clinton. It wasn't a starter home, his credit was good and he made decent money at a stable job.

This continued unabated for 8 years under Bush as well. In spite of warnings from SOME Dems in Congress.

With a few notable exceptions, nobody Democrat or Republican seems all that interested in punishing the criminals or using new regulations to stop them from doing it again.

Most of the banks were bailed out to get them over their cash shortage. As a thank you, they made loans even harder to get, doubled down on robosigning, and dumped the money into commodities and executive bonuses.

'Unsuccessfully fought" != "Idly watching"

[dfenstrate]

Bush didn't sit idly by. From a 2008 article:

Bush's first budget, written in 2001 — seven years ago — called runaway subprime lending by the government-sponsored enterprises Fannie Mae and Freddie Mac "a potential problem" and warned of "strong repercussions in financial markets."

In 2003, Bush's Treasury secretary, John Snow, proposed what the New York Times called "the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago." Did Democrats in Congress welcome it? Hardly.

"I do not think we are facing any kind of a crisis," declared Rep. Barney Frank, D-Mass., in a response typical of those who viewed Fannie and Freddie as a party patronage machine that the GOP was trying to dismantle. "If it ain't broke, don't fix it," added Sen. Thomas Carper, D-Del.

Unfortunately, it was broke.

In November 2003, just two months after Frank's remarks, Bush's top economist, Gregory Mankiw, warned: "The enormous size of the mortgage-backed securities market means that any problems at the GSEs matter for the financial system as a whole." He too proposed reforms, and they too went nowhere.

In the next two years, a parade of White House officials traipsed to Capitol Hill, calling repeatedly for GSE reform. They were ignored. Even after several multibillion-dollar accounting errors by Fannie and Freddie, Congress put off reforms.

In 2005, Fed chief Alan Greenspan sounded the most serious warning of all: "We are placing the total financial system of the future at a substantial risk" by doing nothing, he said. When a bill later that year emerged from the Senate Banking Committee, it looked like something might finally be done.

Unfortunately, as economist Kevin Hassett of the American Enterprise Institute has noted, "the bill didn't become law, for a simple reason: Democrats opposed it on a party-line vote in the committee, signaling that this would be a partisan issue. Republicans, tied in knots by the tight Democratic opposition, couldn't even get the Senate to vote on the matter."

Had they done so, it's likely the mortgage meltdown wouldn't have occurred, or would have been of far less intensity. President Bush and the Republican Congress might be blamed for many things, but this isn't one of them. It was a Democratic debacle, from start to finish.

Re:'Unsuccessfully fought" != "Idly watching"

[sjames]

So, while the whole banking sector was going crazy and the ratings agencies were committing outright fraud, Bush focused on Fanny and Freddie? No wonder nothing changed.